Bullish or Bearish? We Asked, You Answered

'Bullish or bearish?' We asked, you answered... Volatility reigns... 'Work from home' is now recommended... Using Tinder to get the real scoop... A blueprint for recovery?... The market is panicking, but you shouldn't... More about portfolio 'insurance'...

Are you bullish or bearish?

We asked you this question in yesterday's Digest, and our inbox is overflowing with responses...

From a rough count, about 50% of those who answered are full-fledged bulls, 30% are "cautiously optimistic" or somewhere close, and 20% are bearish.

First off, it's great for me (Corey McLaughlin) to read so many nuanced replies from subscribers. Most folks seem to be taking the coronavirus and its associated impacts seriously, while keeping the long term in mind... just as we are here at Stansberry Research.

That's a sound approach, no matter your personal stance. And the mixed replies we've gotten, in a way, reflect the overall volatility we're continuing to see in the markets this week.

Just today, the Dow Jones Industrial Average dipped into a bear market... at least according to those who go by the "20% down from a previous high" definition. The benchmark S&P 500 Index and tech-heavy Nasdaq Composite have now dropped 19% since their mid-February highs.

Here are a few examples of what you said...

We'll share more in our mailbag section as the week goes on.

First up, the bulls. Paid-up subscriber Richard S. wrote in, referencing the "Melt Up"...

I am bullish on the markets for the long term. The fundamentals of this market are way too strong to go down over the long term. There is a Melt Up ahead after we get through all of this noise and fear in the months ahead.

And paid-up subscriber Tamara R. doesn't think the show is over yet...

I am down considerably more than I thought in such a short time, but for the most part I still feel good about my portfolio choices. It's akin to watching your own beautiful child have an ugly-cry melt-down temper tantrum in the middle of the older sister's dance recital...

You can't really believe what is happening, and everyone around you is horrified but there is no way you are going to walk out on the much-anticipated performance. I intend to stay long for the finale!

Thanks to decades of experience, paid-up subscriber Frank B. has learned to remain calm...

My career has been in financing commercial properties from $5 million to $200 million with, in some cases, several millions of dollars at risk. Over my 30+ year career I have learned to not panic and keep a steady course when things don't go as expected. I am applying the same principle to my portfolio.

Although the market correction is deeper and quicker than I first envisioned, it is mainly driven by panic over the Coronavirus. With China's economy turning the corner and with the USA business model the best in the world, I am bullish the market will 'Melt Up' as Steve says, perhaps only a little later than my original projection.

Stay calm and keep those risk-adjusted allocations in line and we should enjoy a Merry Christmas and Happy Holidays!

And finally, paid-up subscriber Ben K. remains confident...

Seems like a temporary correction. A lot of my trailing stops were tripped so I have sold much and lost money, but confident I'll get it back and more in a recovery around the corner.

Now, the bears. In his e-mail, paid-up subscriber Charl W. referenced the constant warnings from our founder, Porter Stansberry, over the past several years...

I want to be bullish but I think we have entered into a bear market now. The weakness in the economy is now being exposed by the virus and lower oil prices that will have a significant impact on the high yield bond market and financials.

Similar to what Porter has been talking/warning about since '15. I also can't believe it survived this far Porter! Anyway, we are where we are now and I doubt we will trade above 3,130 on the S&P again for any significant amount of time. Probably another 5%-10% downside first... rally into months end then SELL.

Thanks for all you do, your work is by far the best to stay updated and ahead of the curve!

And paid-up subscriber Steven A. believes the pain will be much worse moving forward...

Definitely bearish. The coronavirus is just getting started here and everywhere. The economic upheaval that is coming could be devastating. Also, in the last three or four trading days I have personally been stopped out of over 15 positions and am very nervous about getting back in on a bump back up.

All of my stocks, including precious metals/mining and equities are down. So going to cash right now seems best.

And finally, some folks remain in-between. Paid-up subscriber Pete W. thinks we'll "be fine" in the end...

Not an easy answer right now, but long term I continue to be quite bullish. Currently I am "concerned." My concern is not COVID-19. My concern is that there appears to be a genuine public panic that I believe is unwarranted.

I also feel the media is responsible for the generating and feeding the panic. Our businesses and thereby financial markets, are the victims of the panic.

I think the panic will pass and we will get back to business and there is no good reason why we won't get back to a bull market... eventually. Once the media finds something else that they think is more exciting than COVID-19, we should be fine.

And paid-up subscriber Kevin G. plans to keep trusting our knowledgeable experts...

I'm not sure what to think or what to believe. It's sell-off time. An exogenous economic shock and people are scared. The virus will keep spreading. At the same time it will get better.

I will stay the course with True Wealth and I believe that pretty soon there will be great opportunity to load up on stocks.

No matter how you slice it, volatility reigns – and it's near record levels...

Today, the World Health Organization ("WHO") declared the coronavirus a "pandemic." Stocks were down again. And the Federal Reserve said it was injecting more money into our banking system.

The Chicago Board Options Exchange Volatility Index ("VIX") – widely considered the market's "fear gauge" – closed the day at nearly 54. That's extremely stretched...

A month ago today, the same index closed just above 15. It last (briefly) traded above 50 in February 2018...

Since its inception in 1990, the only time the index has been higher was in late October and early November 2008 during the height of the financial crisis.

There's just one issue... This isn't the financial crisis. As Stansberry NewsWire editor C. Scott Garliss told us today in the office...

It's not anywhere close to that. The banks are much more solvent.

That's not to say there aren't concerns in the system... specifically in the roughly $7.2 trillion U.S. corporate-debt market.

In his "Morning Market Commentary" NewsWire post earlier today, Scott detailed all the reasons why... and discussed the dynamic playing out with U.S. 10-year Treasurys trading below 1% for the first time ever.

The more we hear and see 'last time since the financial crisis' types of stats...

The more we're reminded of the perspective our friend Enrique Abeyta provided last week.

Enrique, a partner of Whitney Tilson's at our corporate affiliate Empire Financial Research, penned a fantastic issue of his Empire Elite Trader newsletter last Wednesday.

It was loaded with perspective on the current state of the markets, based on Enrique's decades of experience. In short, he has seen some stuff...

He became a portfolio manager in early 1998 – just before the Long-Term Capital Management crisis... He and his partners launched his largest hedge fund, Stadia Capital, only six months before 9/11... And then, he launched another hedge fund, 360 Global Capital, into the storm of the financial crisis...

Each time, he told subscribers, he needed to come up with a plan. And looking back at his "worst of times" scenarios, he said this sell-off isn't unfolding like the one we saw during the financial crisis...

First, this sell-off likely had little to do with the coronavirus outbreak. Instead, this market environment was primed for this kind of volatility... and the virus just gave it an excuse.

This was a situation where the S&P 500 Index hadn't seen a 2% sell-off in 124 days – the eighth-longest streak in 30 years. The index was up more than 30% in 2019 and had conditioned investors to believe that every smaller sell-off presented a tremendous buying opportunity.

The market consistently had a relative strength index ("RSI") greater than 70 and more than 10% extended from its 200-day moving average ("200-DMA"). Investors were enthusiastic, and stocks ripped higher and higher... This was a market where stocks like Tesla (TSLA) and Virgin Galactic (SPCE) were doubling – and then doubling again – in a matter of weeks...

Instead, across the board, Enrique says, 'There are plenty of similarities between August 2011 and today's situation'...

For example, we have reasonably healthy economies (with some cracks), lots of monetary liquidity, long periods of low volatility, and then a historic walloping of investors...

The overall market is far too big in many ways to be impacted in exactly the same manner, but the "damage" done by the magnitude of a big sell-off – like in August 2011 or the one we just saw – is still impactful. It takes time for the damage to subside and for things to return to normal...

This is likely to play out similarly in today's market...

The markets could remain volatile for the next two months (22 trading days in a typical month, so until early May).

Expect the S&P 500 lows from February 28 of 2,954 (close) and 2,855 (intraday) to be "tested" several times before we bottom – moves of 5% in either direction around that level. It's a big range, but markets will be volatile.

The market will likely eventually "heal" at the end of this period, and we'll return to an environment that's more like what we saw the previous year.

Enrique also said today reminds him of late 1998, when the markets experienced the fifth-worst five-day sell-off over the past 30 years.

"It was also the first crisis where the Federal Reserve really responded with liquidity injections – cutting rates by 75 basis points in less than two months," he said.

If you'd like to read Enrique's full issue of Empire Elite Trader, including his latest recommendations, click here to sign up. In his service, he's "embracing the extremes."

It's only $69 per month, and you can try it out absolutely risk-free... You can cancel anytime within the first 30 days for a full refund – no questions asked.

Today, it feels like people are starting to make a little more sense of everything...

One day down big... one day up big... the next day down big.

Prices are moving as news trickles out about the coronavirus and how governments and institutions are reacting to it... But at least decisions are being made as we learn more.

Here at Stansberry Research, we've seen signs that we might be asked to "work from home," a trend that we first wrote about a few weeks ago as it was unfolding in China...

Our human resources department has asked us to take our work laptops home each night. And this morning, the department asked for our cell phone numbers.

Colleges near our headquarters here in Maryland have canceled their last few days of in-person classes ahead of spring break.

Johns Hopkins University, for example, is implementing "remote instruction" beginning today through at least April 12. This morning, we saw an e-mail from a professor saying class would be held using Zoom Video Communications (ZM) software...

At the same time, your friendly neighborhood LabCorp (LH) or Quest Diagnostics (DGX) affiliate – the same national labs you might send your blood for regular tests – now have the ability to test for COVID-19.

Finally.

That should ease some panic and uncertainty and perhaps help slow the spread of infection... make health care providers' jobs easier... and maybe set in motion an eventual recovery...

If one of those is to happen, we actually have a blueprint for what it might look like already...

Brian Tycangco, an analyst on our colleague Dr. Steve Sjuggerud's research team, wrote about this in a DailyWealth essay yesterday. He discussed what's going on in China, the epicenter of the outbreak...

Brian, who lives in the Philippines, pointed out that business is returning to normal in China. The number of new reported coronavirus cases is down... and China's stock market is doing great over the past month. You can see what we mean in this chart...

As Brian wrote in yesterday's DailyWealth...

It's not obvious to most people yet. But China's powerful recovery could be a road map to how the U.S. and other markets fare in the coming months.

China took the worst hit from COVID-19 first. Its markets fell hard as a result, and its economy took a hit. But now things are settling down. And the Chinese stock market is responding.

In China, the panic is over. The country's markets have become more stable as a result. And if we take a step back from the media panic, we can see that better days are ahead.

A few important points on this comparison...

We haven't met many people who completely trust the number of infections and deaths being reported out of China.

In fact, hilariously (and smartly), some people have set their Tinder dating app accounts – owned by Match Group (MTCH) – to say they're from Wuhan, China, just to see how things are really going there with anyone who "swipes right" on them.

But we also have heard plenty of people who are skeptical of the same numbers here in the U.S... That thousands of folks with undiagnosed cases are probably walking the streets right now.

It might get worse here, but we can't imagine it will get to the level that it did in Hubei province, the epicenter of the virus outbreak that still accounts for 75% of its deaths.

Plus, you may remember that at the height of the crisis in China, its central bank pumped $244 billion into its financial system. And you might recall that the country's stock market was initially closed for a regularly scheduled Lunar New Year break, as the disease was starting to spread.

It closed down 8% the first day it could... and a month later, it has rebounded by about the same number.

The Fed isn't doing exactly the same thing as the People's Bank of China, but it has already taken stimulus measures and might cut interest rates again. And the White House is considering consumer-friendly fiscal policy...

Meanwhile, the U.S. stock market has been open the entire time during this panic... well, except for those 15 minutes on Monday when the New York Stock Exchange "circuit breakers" kicked in...

The point is, it isn't exactly an "apples to apples" comparison. But you could say that it's "red apples to green apples." As Brian wrote...

I expect the U.S. market will see a similar recovery in the coming months. And if that's how this plays out, we'll look back at this time as one of the biggest buying opportunities of the Melt Up.

But we're likely not on the road to a long rally just yet...

We heard some great perspective today from Ben Laidler, CEO of Tower Hudson Research.

Laidler, the former chief equity strategist for investment bank HSBC, was on top of the trends around the Christmastime 2018 correction. And he accurately predicted a 20% return in the major U.S. indexes in 2019 coming out of that correction.

Laidler told Bloomberg Radio this morning that he expects global markets to rebound, but not like they did last year. ("That was an aberration," he said.) And he explained that there are signs we should remain cautious today...

I don't really know how the coronavirus thing pans out. Ultimately, I think markets are going to be fine. The global business cycle is sort of stabilizing. Whether the coronavirus delays that and we need a bit more policy stimulus, I don't know...

What are the two big risks out there today? They're the same as they were in Q4 2018...

We get a big economic slowdown, and all the focus is on China – that's 30% to 40% of global GDP growth. The coronavirus just played right into that again.

And the amount of policy flexibility that is out there globally... that's obviously been getting less and less over the years. People are getting more and more worried about it. The Fed has more than anybody else. There's negative rates in Europe and essentially Japan.

With volatility already this high for this long, we're bound to see big swings continue...

If you're a day trader, it's almost a dream. If you're a long-term investor, it's more of an "adhere to your plan" sort of time.

This brings us back to the idea of portfolio "insurance," which we've written about a few times over the last few weeks in the Digest here and here.

When U.S. stocks are taking a dive, having exposure to "uncorrelated" assets – that move in the other direction, or no direction, at the same time – can help mitigate your losses from stocks.

That's exactly what editor Bill McGilton offers in his Stansberry's Big Trade service.

Bill recently told his subscribers to close out four trades for an average gain of 135%...

And in just nine trading days.

The latest recommendation to close – Capital One Financial (COF) – happened on Monday. In his trade alert to subscribers, Bill said, "The market is panicking... but you shouldn't."

This is easier to do if you're properly allocated...

We've preached the importance of proper asset allocation and position sizing constantly over the past few weeks. "Safe haven" assets like gold and hedges like the type Bill recommends in his Big Trade service are a worthwhile part of any portfolio.

The thing is, the value of these investments only becomes really obvious in volatile times like these...

That's why Bill recently sat down with our video-production folks to put together an urgent briefing on his strategy... and how it can help preserve or even grow your wealth during wild times like we've seen in the last month.

Bill's event will go live at 8 p.m. Eastern time next Monday, March 16. It's free, but we encourage you to pre-register for it right now to make sure you don't miss anything.

Click here for more information and to sign up right now.

New 52-week highs (as of 3/10/20): none.

In today's mailbag, more feedback specific to Dan's Tuesday Digest... Keep your bullish or bearish comments – and anything else – coming at feedback@stansberryresearch.com.

"Dan's essay yesterday a classic already! Thank you, Dan." – Paid-up subscriber Ralph B.

"I don't think you sound like a 'pessimistic curmudgeon,' more like a 'pissed-off curmudgeon.' This is by far your best (among many outstanding) rants! Spot on!" – Paid-up subscriber Terry H.

"Thanks for the laughs Dan, what a great and insightful read!" – Paid-up subscriber Maureen M.

All the best,

Corey McLaughlin
Baltimore, Maryland
March 11, 2020